How do appraisers deal with “mold” situations?

If it looks like a duck, quacks like a duck and walks like a duck, it’s a….. If only it were that easy when identifying mold. Since appraisers are usually not mold specialists, we need to be careful when calling something mold or not. This is because sometimes excessive moisture issues can be easily cured, but other times it can be a toxic situation and expensive to handle properly. Since appraisers really aren’t qualified to analyze the difference, it’s best to handle the situation carefully.

Would this laundry room and bedroom scare you off from making a purchase?

Mold photo in Laundry Room - photo from an appraiser friend

Mold photo in Bedroom - photo from an appraiser friend

What about this damage from a leaking roof? No biggie or big deal?

Damage in Garage - Mold or Not - That is the question

What do appraisers say in appraisal reports for properties like this? First off, we ought not call something “mold” until we get clarification from a licensed mold professional, so appraisers often describe something like this as “an unknown blackish-greenish substance”. Once we do find out what the substance is, then we can better analyze the impact on value depending on cost-to-cure and the reaction in the marketplace to such a substance. After all, there is a huge difference between needing to spend a few hundred dollars to cure a moisture problem and dealing with toxic mold (see Wikipedia: Mold Health Issues).

Can’t the appraiser simply ignore the issue? The Fannie Mae appraisal report form (1004) asks appraisers to identify any physical deficiencies or adverse conditions that might affect the livability, soundness or structural integrity of a property. The blackish-greenish substance in the photos above might potentially impact livability, so the appraiser should absolutely make note of that (especially for the first two photos). But the appraiser can just not take photos, right? Even if the appraiser doesn’t take photos, the appraiser should describe the issue in the report. A lack of photos doesn’t make the problem go away.

Here is an example of what I might say about the third photo above:

“There is an unknown blackish-greenish substance on the ceiling of the garage (see photo). The Listing Agent states there was a roof leak in the garage. It is not known to the appraiser what this substance is since inspecting this substance is outside of the scope of the appraiser’s expertise. The appraiser recommends an inspection by a qualified professional and reserves the right to adapt the opinion of value based upon new information.”

It’s not my job to assume: A statement like this highlights the issue and calls for further investigation by my client. Honestly, it looks like a minor issue to me, but you’ll notice I don’t assume it is “no biggie.” I don’t identify the cause of the problem or the exact remedy either. My job is to simply explain what I saw and then leave the diagnosis and remedy to other qualified professionals. When I encounter an “unknown blackish substance” I make the appraised value in the report “subject to” further inspection. That way when the inspection report comes back, I can make an informed decision on how to proceed. It could be a quick fix for a few hundred dollars or there could be a much bigger issue if the unknown substance is actually the “bad stuff”.

NOTE: If the substance situation was more extensive like the first two photos, after buying a space suit to inspect the property (kidding… sort of), I’d ask my client for a mold inspection and contractor’s bid for a cost-to-cure before completing the appraisal.

Have how you seen mold impact your real estate sales or loans? What sort of mold issues have you seen before?

If you have any questions or Sacramento area real estate appraisal or property tax appeal needs, contact me by phone 916-595-3735, email, Twitter, subscribe to posts by email or “like” my page on Facebook


  1. John Braca says

    If you were hired to appraise a home that had untreated mold for 7 years and you need to establish the “as is’ value for a court to determine the value,whithout doing the remediation, whitout knowing how far it has spread in floors, walls, ceilings could you still certify as to the cureent “as is” value.

    If the mold was created by 3 huge leaking stone chimneys that also need repair and that cost is unknown, could you certify the “as is” value to a court.

    • says

      Hi John. That sounds like a complicated situation. My first question would be why the remediation cost could not be determined. Why couldn’t a contractor give an estimate of some sort? The appraiser really should have more information (if available). I suppose the appraiser could do an “as is” value still, but with some major disclaimers in the report about the condition of the property and potential for a huge impact to value. Personally, that’s quite a bit of liability and I’d probably decline the assignment and not do an appraisal like this where I didn’t have adequate information.

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